A monetary policy debate has flared up after Virabongsa Ramangura, the Bank of Thailand chairman, questioned the central bank's inflation-targeting framework. Dr Virabongsa reasoned that in a small economy with a high degree of openness such as Thailand, global prices would determine local prices, allowing foreign exchange to to control inflation.
Central bank officials said the inflation-targeting monetary policy it adopted in 2001 is flexible enough to support growth while being effective in managing inflation expectations. The central bank also argued that pegging the baht to a certain rate could risk distorting economic fundamentals and create imbalances.
Local economists agreed the Thai economy needs to improve productivity to avoid a slowdown in growth, but they generally remained satisfied with the central bank's inflation targeting.
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